Govt announces incentive for mills exporting sugar, diverting it to ethanol

The Centre on Thursday announced an incentive for sugar mills in the form of an additional domestic sales quota to those that export sugar and divert the commodity towards ethanol making, in the new 2021-22 season starting October.

Sugar mills have also been asked to take advantage of firm global sugar prices and plan export of raw sugar in advance in the new season (October-September), it said.

This indicates that the government is unlikely to extend the export subsidy from the new season, as it would be easier for domestic mills to sell sugar abroad in view of firm global prices.

India, the world's second-largest sugar-producing country, had to offer export subsidies in the past two years, to reduce surplus stocks and help cash-starved sugar mills clear cane payment to growers.

In a statement, the food ministry said, "Sugar mills which will export sugar and divert sugar to ethanol would also be given incentive in the form of additional monthly domestic quota for sale in the domestic market."

Currently, the government fixes a monthly quota for the sale of sugar in the domestic market. On an average, about 21 lakh tonne quota is fixed for a monthly sale for mills.

According to the ministry, some sugar mills have also signed forward contracts for exports in the new season.

The global sugar prices have increased substantially in the past one month, and there is a huge demand for Indian raw sugar, it said.

Accordingly, the ministry said it has asked domestic sugar mills to plan production of raw sugar for export purposes in the new season from the beginning.

The ministry also asked mills to "sign forward contracts with the importers to take advantage of high international prices of sugar and global deficit".

Export of sugar and diversion to ethanol would help in improving the liquidity of mills, enabling them to make timely payment of cane dues of farmers. It will also stabilise ex-mill price of sugar in the domestic market, which in turn will further improve mills' revenue realisation and address the problem of surplus sugar, it said.

With an increase in blending levels, the ministry said the dependence on imported fossil fuel will decrease and will also reduce the air pollution besides boosting agricultural economy, it added.

On exports undertaken so far in the current 2020-21 season, the ministry said mills have contracted for export of seven million tonnes, against the mandatory quota of six million tonnes fixed for the current season ending next month.

Out of this, more than 5.5 million tonne of sugar was exported till August 16, it said.

Exports stood at 5.96 million tonnes in 2019-20, 3.8 million tonnes in 2018-19, and 6,20,000 tonnes in 2017-18 season.

Due to the improvement in liquidity of mills following government measures, the ministry said Rs 75,703 crore cane dues of the 2019-20 season were cleared by mills and only Rs 142 crore arrears are pending now.

In the ongoing 2020-21 season, mills purchased a record sugarcane worth about Rs 9,07,872 crore, against which about Rs 81,963 crore cane dues have already been paid to farmers, it said.

According to the ministry, sugar mills made a revenue of Rs 22,000 crore from the sale of ethanol in the past three seasons.

In the ongoing 2020-21 season, about Rs 15,000 crore revenue is being generated by sugar mills from the sale of ethanol which has helped mills in making timely payment of cane dues to farmers, it said.

For ethanol making, mills had diverted 9,26,000 tonne of sugar in 2019-20 and 3,37,000 tonne in 2018-19. And, in the current season, more than 20 lakh tonnes is likely to be diverted.

In the new season, about 35 lakh tonnes of sugar is estimated to be diverted; and by 2024-25, about 60 lakh of sugar is targeted to be diverted to ethanol, which would address the problem of excess sugarcane/ sugar as well as delayed payment issue, the ministry said.

"However, as the adequate ethanol distillation capacities would be added by 2024-25, export of sugar will continue for another 2-3 years," the ministry added.